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Janice France-Pettit: Planning for retirement

Posted: August 29, 2012 2:00 a.m.
Updated: August 29, 2012 2:00 a.m.

The decision of when to retire is an individual one and depends on a number of personal factors. According to a 2012 survey by the Employee Benefit Research Institute, only 14 percent of American workers feel very confident they’ll have financial security in retirement, and among current retirees, only 21 percent report feeling very confident in their financial situation.

Whether you are decades away from retirement, or if it is in your near future, a comfortable retirement requires planning, commitment and a sound financial plan. Following are a few tips to help with retirement planning.

Determine, plan for your needs

The first step toward creating a financial plan is to calculate how much money you will need for retirement.

A few things to consider are your health status, the amount you have already saved for retirement, your current economic needs and debts, employment and investment income, and the lifestyle that you would like to maintain in retirement.

Most experts estimate that you will need to save somewhere between 70 to 75 percent of your pre-retirement income to maintain your standard of living when you stop working.

Ideally, as you approach retirement age, you have paid off all major debts, but, with life expectancy on the rise, be prepared for the possibility of having enough retirement savings and income to last as long as 20 or 30 years.

Consider scheduling a retirement income evaluation with your banker or financial advisor.

Start saving as early as possible

Save and invest as early as possible in your career to allow your money to grow over time, and take advantage of compound interest. Compound interest is interest that is paid on both the principal and on any interest from past years. If you find it difficult to save, start with a small amount and try to increase the amount you save each month.

Learn about retirement plans

Find out if your employer offers a retirement savings plan, such as a 401(k) or a pension, and take advantage of these benefits if you are eligible.

A 401(k) is a retirement savings plan in which your employer withholds a portion of your income as a contribution to the plan which is invested. The contribution is not taxed until retirement and the employee can claim it as a tax deduction.

Over time, the compound interest and tax deferrals can make a big difference in the amount you will be able to accumulate. Your employer might also offer a matching contribution, which means for every dollar you contribute, your employer contributes another amount up to a certain point.

Some employers still offer a traditional pension plan (or defined benefit plan). These plans offer guaranteed automatic payouts in your retirement based on a formula that usually takes into account your salary and years of service. Pension plans are usually fully funded by the employer.

If neither you nor your spouse has a 401(k) or pension, consider other retirement savings options available, such as an Individual Retirement Account (IRA). You can contribute up to $5,000 each year into an IRA, and even more if you are 50 years or older.

IRAs also provide certain tax advantages, depending on which type you choose. Traditional IRA contributions are tax deductible, but taxes are paid when you begin withdrawing in retirement. A Roth IRA isn’t tax deductible, but you won’t have to pay taxes on it when you start drawing money out in retirement.

Understand Social Security benefits

Social Security is a government insurance program that you pay into when you are employed and it provides almost all working Americans a source of retirement income.

You’re eligible to begin claiming Social Security benefits at age 62, but the longer you wait to claim your benefits, the higher the monthly payout will be.

On average, benefits currently amount to only 40 percent of your pre-retirement earnings, and could be less depending on how much you earned during your career.

The column is co-authored by Janice France-Pettit and Riqo Fraser. France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal. The foregoing article is intended to provide general information about retirement planning and is not considered financial or tax advice from Union Bank. Please consult your financial or tax advisor. Visit for more information.


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